UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported):
(Exact name of registrant as specified in its charter)
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act. |
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act. |
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act. |
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act. |
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02. | Results of Operations and Financial Condition. |
On July 14, 2022, Cass Information Systems, Inc. (the “Company”) made available on the Investors section of the Company’s website at www.cassinfo.com, an investor presentation that includes information about the Company’s business and developments and certain financial information relating to the quarter ended June 30, 2022. A copy of this investor presentation is attached hereto as Exhibit 99.1 and incorporated herein by reference.
The Company has used, and intends to continue using, the Investors portion of its website to disclose material non-public information and to comply with its disclosure obligations under Regulation FD. Accordingly, investors are encouraged to monitor the Company’s website in addition to following press releases, SEC filings, and public conference calls and webcasts.
The information reported under this Item 2.02 of Form 8-K, including Exhibit 99.1, is being furnished and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
| Item 9.01. | Financial Statements and Exhibits. |
| (d) | Exhibits. |
| Exhibit Number |
Description | |
| 99.1 | Investor presentation for the quarter ended June 30, 2022. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: July 14, 2022
| CASS INFORMATION SYSTEMS, INC. | ||
| By: | /s/ Eric H. Brunngraber | |
| Name: | Eric H. Brunngraber | |
| Title: | Chairman and Chief Executive Officer | |
| By: | /s/ Michael J. Normile | |
| Name: | Michael J. Normile | |
| Title: | Executive Vice President and Chief Financial Officer | |
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Exhibit 99.1 The Power to Deliver Solutions Around the world, leading enterprises rely on Cass for our vertical expertise, processing power, and global payment network to execute critical financial transactions while driving greater control and efficiency across critical business expenses. Q2 2022 INVESTOR PRESENTATION
TABLE OF CONTENTS Forward-Looking Statements 3 4 Cass at a Glance 8 Financial Performance 11 Revenue 16 Balance Sheet 21 Capital 22 ESG Highlights 23 Leadership and Shareholder Information 2 www.cassinfo.com / © 2022 Cass Information Systems
FORWARD LOOKING STATEMENTS This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements contain words such as “anticipate,” “believe,” “can,” “would,” “should,” “could,” “may,” “predict,” “seek,” “potential,” “will,” “estimate,” “target,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “intend” or similar expressions that relate to the Company’s strategy, plans or intentions. Forward-looking statements involve certain important risks, uncertainties, and other factors, any of which could cause actual results to differ materially from those in such statements. Such factors include, without limitation, the “Risk Factors” referenced in our most recent Form 10-K filed with the Securities and Exchange Commission (SEC), other risks and uncertainties listed from time to time in our reports and documents filed with the SEC, and the following factors: ability to execute our business strategy; business and economic conditions; effects of a prolonged government shutdown; economic, market, operational, liquidity, credit and interest rate risks associated with the Company’s business; effects of any changes in trade, monetary and fiscal policies and laws; changes imposed by regulatory agencies to increase capital standards; effects of inflation, as well as, interest rate, securities market and monetary supply fluctuations; changes in the economy or supply-demand imbalances affecting local real estate values; changes in consumer and business spending; the Company's ability to realize anticipated benefits from enhancements or updates to its core operating systems from time to time without significant change in client service or risk to the Company's control environment; the Company's dependence on information technology and telecommunications systems of third-party service providers and the risk of systems failures, interruptions or breaches of security; the Company’s ability to achieve organic fee income, loan and deposit growth and the composition of such growth; changes in sources and uses of funds; increased competition in the payments and banking industries; the effect of changes in accounting policies and practices; the share price of the Company’s stock; the Company's ability to realize deferred tax assets or the need for a valuation allowance; ability to maintain or increase market share and control expenses; costs and effects of changes in laws and regulations and of other legal and regulatory developments; technological changes; the timely development and acceptance of new products and services; the Company’s continued ability to attract, hire and maintain qualified personnel; ability to implement and/or improve operational management and other internal risk controls and processes and reporting system and procedures; regulatory limitations on dividends from the Company's bank subsidiary; changes in estimates of future loan reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; widespread natural and other disasters, pandemics, dislocations, political instability, acts of war or terrorist activities, cyberattacks or international hostilities; adverse effects due to the novel Coronavirus Disease 2019 (COVID-19) on the Company and its clients, counterparties, employees, and third-party service providers, and the adverse impacts on our business, financial position, results of operations, and prospects; impact of reputational risk; and success at managing the risks involved in the foregoing items. The Company can give no assurance that any goal or plan or expectation set forth in forward-looking statements can be achieved, and readers are cautioned not to place undue reliance on such statements. The forward-looking statements are made as of the date of original publication of this presentation, and the Company does not intend, and assumes no obligation, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by applicable law. This presentation is a high-level summary of our recent and historical financial results and current business developments. For more detailed information, please refer to our press releases and filings with the SEC. 3 www.cassinfo.com / © 2022 Cass Information Systems
CASS AT A GLANCE 4 www.cassinfo.com / © 2022 Cass Information Systems
HOW CASS CREATES VALUE At Cass, we provide the means to accept highly We are the trusted third party, validating diverse inputs spanning paper, digitized pricing and contractual agreements. documents, digital data, and data feeds in We are recognized by the high level of service multiple formats. we provide, while processing millions of these We turn unstructured inputs into structured transactions and billions of dollars accurately, and actionable information, typically around on time, and in a cost effective, safe, and financial transactions but also including secure manner. supporting data elements for auditing purposes. We also provide payment and financing We support client/vendor relationships, solutions in conjunction with these services inserting highly qualified business experts and and to customers of our subsidiary, Cass industry specialists into the conversation. Commercial Bank. 5 www.cassinfo.com / © 2022 Cass Information Systems
WHY CLIENTS CHOOSE CASS We are recognized as an industry leader in the Because we have CCB, we can be nimble in our freight, audit and payment space. Since 1995, ability to drive bank product offerings needed the Cass Freight Index®, referenced everywhere by our clients. from the Wall Street Journal to Bloomberg, has We are a leader in specialty lending niches been the source for data on North American offered by CCB, including faith-based freight volumes and expenditures. organizations and restaurant franchises. We have our own bank, Cass Commercial Bank We have a 115+ year history of providing (CCB), to support our payment operations. CCB is exceptional client service and value. We always regulated by the Federal Reserve Bank, Missouri take a long-term view when it comes to our Division of Finance and FDIC. Our clients, mostly relationship with our clients and the large companies, value the additional scrutiny communities we serve. most of our competitors are not subject to. 6 www.cassinfo.com / © 2022 Cass Information Systems
HELPING THE BEST BUSINESSES BECOME BETTER 7 www.cassinfo.com / © 2022 Cass Information Systems
FINANCIAL PERFORMANCE 8 www.cassinfo.com / © 2022 Cass Information Systems
Q2 2022 FINANCIAL HIGHLIGHTS NET INCOME DILUTED EPS RETURN ON EQUITY $8.56M + Record net income of $8.6 million 16.53% $0.62 $7.03M $0.48 10.83% + Record diluted EPS of $0.62 + Return on average equity of 16.53% + Record quarterly transportation dollar Q2 '21 Q2 '22 Q2 '21 Q2 '22 Q2 '21 Q2 '22 volumes of $11.4 billion + Record quarterly financial fees of $10.6 million TRANSPORTATION FINANCIAL FEES NET INTEREST DOLLAR VOLUME MARGIN + No nonperforming assets or charge-offs 2.54% $11.41B $10.62M $8.94B $7.50M 2.30% Q2 '21 Q2 '22 Q2 '21 Q2 '22 Q2 '21 Q2 '22 9 www.cassinfo.com / © 2022 Cass Information Systems
PROFITABLE GROWTH TOTAL REVENUE NET INCOME DILUTED EPS $8.56M $44.2M $0.62 $8.26M $0.60 $0.55 $42.1M $7.70M $0.48 $0.48 $7.03M $40.0M $6.80M $38.7M $38.4M Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 RETURN ON EQUITY RETURN ON ASSETS 16.53% 1.32% 1.31% 14.21% 12.70% 1.24% 1.22% 10.83% 10.61% 1.14% Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 10 www.cassinfo.com / © 2022 Cass Information Systems
REVENUE 11 www.cassinfo.com / © 2022 Cass Information Systems
FINANCIAL FEES FINANCIAL FEES Financial fees are earned via use of our balance sheet to make customer invoice payments. Cass makes payments to our clients’ vendors in advance of when the $10.6M $10.5M $9.6M $8.6M $7.5M corresponding invoice is due for a fee. The change quarter to quarter is highly correlated to transportation and facility dollar volumes which have been trending higher due to higher energy prices and inflationary pressures. Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 TRANSPORTATION DOLLAR VOLUMES FACILITY DOLLAR VOLUMES AVERAGE PAYMENTS IN ADVANCE OF FUNDING $4.64B $4.57B $4.28B $4.22B $11.4B $293.2M $3.66B $10.9B $279.5M $10.4B $257.3M $9.5B $8.9B $213.9M $197.9M Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 12 www.cassinfo.com / © 2022 Cass Information Systems
PROCESSING FEES Processing fees are earned on a per-item or monthly basis generally for invoice processing services, including turning unstructured inputs into structured and actionable information. The change quarter to quarter is generally correlated to transportation and facility invoice volumes. TRANSPORTATION INVOICE VOLUMES FACILITY INVOICE VOLUMES PROCESSING FEES 6.83M $19.3M $19.0M 6.76M $19.0M 6.68M $18.7M 9.46M 6.64M $18.5M 6.56M 9.33M 9.29M 9.20M 8.96M Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 13 www.cassinfo.com / © 2022 Cass Information Systems
NET INTEREST INCOME Cass earns net interest income by investing its funding sources consisting of non-interest bearing float received from invoice processing and payment customers (accounts and drafts payable) and deposits from Cass Commercial Bank customers into short- term investments, investment securities and loans. The recent increase in short and long-term interest rates has had a positive impact on net interest income and margin. NET INTEREST INCOME AVERAGE INTEREST-EARNING ASSETS NET INTEREST MARGIN 2.54% $2.22B $13.6M $11.9M 2.36% $11.7M $11.4M $2.12B $10.8M $2.10B $2.04B 2.32% $1.97B 2.30% 2.30% Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 14 www.cassinfo.com / © 2022 Cass Information Systems
OPERATING EXPENSE Personnel expense increased during the second quarter of 2022 as compared to the same quarter last year as a result of an increase in base salaries and an increase in stock compensation and profit sharing of $1.0 million and $346,000, respectively. The increase as compared to the first quarter of 2022 was due to the annual base salary increase and an increase in stock compensation of $494,000. Cass is investing in various technology initiatives to gain better operational efficiency in the short-term. OPERATING EXPENSE EFFICIENCY RATIO $33.6M $31.8M $31.3M $30.7M $29.8M $7.6M $7.1M 79.40% $7.8M $7.4M $6.9M 78.40% 77.60% 76.10% 75.60% $26.0M $24.7M $23.5M $23.3M $22.9M Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Personnel Expense All Other Operating Expense 15 www.cassinfo.com / © 2022 Cass Information Systems
BALANCE SHEET 16 www.cassinfo.com / © 2022 Cass Information Systems
LOANS Cass has experienced good organic loan growth in recent quarters, in particular its specialty franchise and faith-based niches. Cass has not incurred a loan charge-off since 2015. ($$ in millions) PORTFOLIO COMPOSITION — 6/30/22 Portfolio Composition 6/30/21 9/30/21 12/31/21 3/31/22 6/30/22 Franchise 92.0 122.0 189.1 198.2 189.0 Faith- Faith-Based 355.3 371.8 370.3 380.9 369.6 Based Leases 58.7 64.9 80.3 86.3 92.4 38% PPP Loans 56.6 16.3 6.3 1.3 1.0 Franchise 20% Other 308.4 297.9 314.6 310.5 307.5 Leases Ending Loans 871.0 872.9 960.6 977.2 959.5 10% Other ACL/Loans 1.28% 1.32% 1.25% 1.27% 1.31% 32% Net Charge-Offs————— Non-Performing Assets————— 17 www.cassinfo.com / © 2022 Cass Information Systems
INVESTMENTS Cass has a high quality investment portfolio, with all investments other than corporate bonds being U.S. agency backed. Corporate bonds are all investment grade of “A” or higher. ENDING INVESTMENTS INVESTMENT TAX EQUIVALENT YIELD PORTFOLIO COMPOSITION 2.36% $774.6M $98.6M $740.1M 2.27% STATE AND $673.5M POLITICAL 2.19% $541.1M $86.8M $507.0M MBS $183.5M 2.10% 2.08% US TREASURIES $49.8M CORPORATE BONDS $321.4M ASSET-BACKED Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 18 www.cassinfo.com / © 2022 Cass Information Systems
FUNDING For 2Q 2022, 74.4% of average funding was noninterest bearing. Deposits have increased in recent quarters due to organic deposit growth fueled by an abundance of liquidity in the economy. Accounts and drafts payable have increased due to rising energy prices and inflationary pressures. AVERAGE DEPOSITS AVERAGE ACCOUNTS AND DRAFTS PAYABLE $1.14B $1.23B $1.17B $1.12B $1.09B $1.09B $1.05B $1.02B $1.01B $0.95B Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 19 www.cassinfo.com / © 2022 Cass Information Systems
IMPACT OF INTEREST RATES Cass earns net interest income off the float generated by its payment business in addition to Cass Commercial Bank. As interest rates have decreased to historically low levels, the net interest margin has also deteriorated. Cass is well positioned for rising interest rates as 74.4% of funding is noninterest bearing. As interest-earnings assets reprice to current market interest rates, Cass is expected to experience a gradual rise in its net interest margin as asset yields will increase at a higher rate than funding costs. The loan and investment portfolios have average repricing terms of 3.9 and 4.5 years, respectively. ANNUAL NET INTEREST MARGIN 4.00% 3.63% 3.43% 3.38% 3.36% 3.34% 3.32% 3.32% 2.82% 2.45% 2.31% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 YTD 2022 20 www.cassinfo.com / © 2022 Cass Information Systems
CAPITAL + $110.2 million in excess of capital over Tier 1 leverage 8.85% ratio at 6/30/22 7.0% common equity tier 1 risk-based regulatory requirement Common equity tier 1 risk- + Maintain excess capital to support 13.47% based ratio at 6/30/22 organic balance sheet growth and opportunistic acquisitions Tier 1 risk-based 13.47% + Annual dividend of $1.12 per share and ratio at 6/30/22 Cass has continuously paid regularly Total risk-based scheduled cash dividends since 1934 14.21% ratio at 6/30/22 21 www.cassinfo.com / © 2022 Cass Information Systems
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) HIGHLIGHTS In 2022, we published our inaugural ESG report, a copy of which is available on our Investor Relations site. To read more from the Cass ESG report, please follow this link to cassinfo.com 22 www.cassinfo.com / © 2022 Cass Information Systems
LEADERSHIP AND SHAREHOLDER INFORMATION 23 www.cassinfo.com / © 2022 Cass Information Systems
BOARD OF DIRECTORS Eric H. Brunngraber Wendy J. Henry Joseph D. Rupp Chairman and Retired Managing Partner, Lead Director and Retired Chairman, President, Chief Executive Officer BKD, LLP and Chief Executive Officer, Olin Corporation Ralph W. Clermont James J. Lindemann Randall L. Schilling Retired Managing Partner, Retired Executive Chief Executive Officer, KPMG LLP, Saint Louis, Missouri Vice President, Emerson OPO Startups, LLC Robert A. Ebel Sally H. Roth Franklin D. Wicks, Jr., Ph.D. Retired Chief Executive Officer, Retired Area President — Retired Executive Vice President and Universal Printing Company Upper Midwest, Regions Bank President, Applied Markets, Sigma-Aldrich Benjamin F. (Tad) Edwards, IV Chairman, Chief Executive Officer, and President, Benjamin F. Edwards & Company 24 www.cassinfo.com / © 2022 Cass Information Systems
LEADERSHIP COUNCIL Cory J. Bricker Carl N. Friedholm Sean M. Mullins Matthew S. Schuckman Vice President, Vice President and General Manager, Vice President, Enterprise Executive Vice President, General Integrated Financial Solutions Telecom Expense Management Infrastructure and Security Counsel, and Corporate Secretary Eric H. Brunngraber Nicole M. Jennings Michael J. Normile Anthony G. Urban Chairman and Chief Vice President, Executive Vice President and Executive Vice President, Executive Officer Internal Audit Chief Financial Officer Transportation Information Services Mark A. Campbell Gary B. Langfitt Christi A. Reiter Todd J. Wills President, Transportation President, Vice President, Senior Vice President and General Information Services Expense Management Services Human Resources Manager, Utility Expense Management James M. Cavellier Teresa D. Meares Martin H. Resch Executive Vice President and Vice President and General Manager, President and Chief Information Officer Waste Expense Management Chief Operating Officer Dwight D. Erdbruegger Ross M. Miller Jeanne M. Scannell President, Cass Commercial Bank Vice President and General Manager, Chief Credit Officer, TouchPoint and Gyve Cass Commercial Bank 25 www.cassinfo.com / © 2022 Cass Information Systems
SHAREHOLDER INFORMATION CORPORATE HEADQUARTERS CORPORATE HEADQUARTERS TRANSFER AGENT Cass Information Systems, Inc. Security analysts, investment managers, Shareholder correspondence 12444 Powerscourt Drive, Suite 550 and others seeking financial information should be mailed to: Saint Louis, Missouri 63131 about the Company should contact: 314.506.5500 Computershare Cass Information Systems, Inc. P.O. Box 505000 cass@cassinfo.com 12444 Powerscourt Drive, Suite 550 Louisville, KY 40233 www.cassinfo.com Saint Louis, Missouri 63131 Overnight correspondence 314.506.5500 should be mailed to: COMMON STOCK INDEPENDENT AUDITORS Computershare The company’s common stock trades KPMG LLP 462 South 4th Street, Suite 1600 on the NASDAQ stock market under 10 South Broadway, Suite 900 Louisville, KY 40202 the symbol CASS. Saint Louis, Missouri 63102 SHAREHOLDER WEBSITE SHAREHOLDER ONLINE INQUIRIES TOLL-FREE PHONE www.computershare.com/investor www-us.computershare.com /investor/Contact 866.323.8170 26 www.cassinfo.com / © 2022 Cass Information Systems
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